“I was being called a broker when I was the innovator and pioneer”

My interview as featured in the Fourth Anniversary Special Issue of Forbes India Magazine with Rohin Dharmakumar…

Alok Kejriwal: I was being called a broker when I was the innovator and pioneer

Alok Kejriwal talks about the challenges he faced when he tried selling value-added content to telecom operators and television channels

Image: Prasad Gori for Forbes India

It was 2005-06, and the mobile value added services market that I had single-handedly curated in India was collapsing, leading to bullying and pushing. That was my moment of ‘maximum pain’ and made me realise what I had to do. Before India, we had created a mobile SMS platform, Mobile2Win, in China. In order to engage customers using TV as a medium, we created SMS-based campaigns around branded content. Coca-Cola became one of our biggest customers using the simple concept of “SMS ‘Coke’ to 1234 to win a prize”. We became leaders in that before bringing the technology to India in 2003-04.

As we started to engage with TV channels, I ran into Sony Entertainment Television. We explained to them the power of mobile-meets-television like this: “People watch TV with [sic] their mobile phones, and if you can provoke and excite them, they will SMS you back. There’s money in that and you will get a revenue share.”

To convince the then head of Sony, Sunil Lulla, of our concept, I recorded the title song of their hit show Jassi Jaisi Koi Nahin on my Nokia. My team then converted it into a ringtone, which two of my colleagues and I stored on our phones before we met Sunil. I asked my office to call us in succession during the meeting. So Sunil was confronted with his show’s music ringing on all three of our phones at the same time. 

“What is the meaning of this? What are you guys up to?” he asked. We told him we could provide all his viewers with such ringtones through a simple SMS to a short code, and he could keep 50 percent of all the resulting revenues. He immediately agreed.

Then I went to Vodafone and Airtel to sell the idea to them. They agreed, in return for a 50 percent share of revenue. So, of every Rs 10 I got from a customer, Airtel or Vodafone kept Rs 5, and of the remaining Rs 5, I gave Rs 2.5 to Sony. That left me with Rs 2.5.

That ringtone alone earned us Rs 40 lakh, of which Rs 10 lakh came in less than three months. People were shocked that money could be made on something as silly as a ringtone. Sony understood the power of the idea and gave us the contract for their upcoming mega show Indian Idol.

Sadly, by 2006-07, we were being arm-twisted and bullied by the operators and TV channels. Operators told us, “We’re not going to give you more than 20-30 percent of SMS revenues; take it or leave it!” On the other hand, Sony and other channels told us, “We own the content, so you don’t deserve more than 10-15 percent of revenues!”

As a result, my share fell from 25 percent to 3 percent in just a few years. I was being called a “mere broker and dalal” when, instead, I was an innovator and pioneer. That was a flashpoint for me, which made me realise some powerful emotions bordering on revulsion. 

There was no faith in what people stood for. Operators don’t have any morals or faith in anyone who helps them build their business. While this was going on in India, Japan’s NTT DoCoMo was sharing 90 percent of their VAS revenues with content producers in China; but no one in India was willing to listen. 

I realised unless you create proprietary content nobody gives a shit and you’re just a dalal with a Rexine pouch under your armpit!

In contrast, in China if you deal with any company, the default operating code is co-operation, which in their language means collaboration. We didn’t have a mindset of collaboration in India’s mobile industry.

The problem was that in India, mobile operators were merely mobile tower operators used to billing consumers for telephony. They never thought their revenue would include something not created or generated by them. And though they were run by very capable professionals in their earlier stages, as they got larger the quality of talent went down. They were taken over by the Indian culture of ‘purchasing mentality’. The executives dealing with partners like us were merely purchase managers rather than partner managers, and their focus was purchase efficiency. Their attitude towards smaller partners is, “Nichodh lo jitna tel nikalta hai! [Squeeze out as much as you can.]”

Even today that mindset persists because it is not accidental. It didn’t happen because companies were growing rapidly or maturing fast. It is systemic. 

In the last five to 10 years, a lot of entrepreneurs who didn’t get out in time like we did got mauled, because for operators it was all about the short-term. Indian business owners and key decision makers operate almost universally on a quarter-on-quarter plan. 

I haven’t come across anybody who has said that their objective is to make the ecosystem bigger in, say, three to five years, or that they should be aiming to build a bigger pond than merely eating up all the fish. Even with Sony TV, supposedly an international corporation, why were they impatient to extract more pounds of flesh? Because they were focusing merely on the current or the next quarter. 

As Indians we think someone else’s profit always comes at our expense. We don’t think partners have a ‘right to a profit’, so if I can control it, I will demand 90 percent of someone’s revenue without caring for a moment what was the source of that revenue. We are very uncomfortable in making others comfortable. And ‘minimum guarantee’ or MG [content owners demand a certain ‘minimum guaranteed fee’ from their downstream licensees, instead of a share of profit] is the greatest expression of that insecurity. It originates neither from the operator nor the distributor, but from the content owner. It’s again a short-term outlook of earning ‘at least’ something. There’s a reason George Lucas never did an MG on his Star Wars franchise, because he wasn’t Indian. MG essentially means you don’t have belief in your content, so you want to make as much money on it as quickly as possible.

There is also the fact that partnerships in India have traditionally existed only between people or between joint venture partners, never between smaller companies and larger ones. Most large companies hire contractors, who in turn hire labourers or workers. The attitude of the large company almost always is, “I’ll pay you, and I don’t care what you pay your staff.”

So in our case, I think Airtel would have been okay if I told them “I will give you Rs 3 for every SMS”, instead of “I will share 30 percent for every SMS”. But once they knew what I was making, they got uncomfortable. So by being transparent and telling people what we would make collectively, I was putting a noose around my own neck. Because as I got bigger, the likes of Airtel and Sony said, “You don’t deserve to become bigger using our businesses.” Because for them, it was the equivalent of telling their contractors that their fees or salaries would increase as the company’s revenues went up.

That was the lowest point in my life when I realised that we Indians were putting each other down to build ourselves. So, I sold my entire mobile business to Norwest and started afresh. I decided I would be based in India but have nothing to do with India. I would have a code of honour. And I wanted to rely only on my own intellectual property.

The result was Games2Win, a completely international-focussed games business, and luckily, I got funded by Clearstone Venture Partners. I decided to de-risk myself as much as possible from what had caused the failure of my earlier business.

I launched myself in the most laissez-faire market in the world: America. I then looked for an American venture capital fund that had the culture I wanted. In the past, I had been funded by ICICI, so I started afresh with capital that contained the DNA of what I wanted to build. Clearstone, which had funded companies like mp3.com and PayPal, exemplified what I wanted to become.

From Day One, I operated from America. No one had tried to build games and apps from India and sell them in the US, but because we had enough capital ($4 million) we could build that business right from inception.

While choosing partners, we chose Viacom in the US because it was broad and general. Our partnership agreement was loosely “I give you content, and you give me traffic”. Each of us made money on our own, which allowed me to remove the equation of revenue-sharing from our relationships altogether. I didn’t want to bastardise the relationship from the beginning.

Today everything that represented the cancer of mobile operator-driven business models has been cured by the app stores of Amazon, Google and Apple. When those models arrived, it was what we had always wanted. They keep 30 percent and we 70 percent, but only if we charge consumers.

The reason I highlight that is because some years back, Coca-Cola approached us in India for branded SMS content. Coke said they had cricketers and movie stars as brand ambassadors, who we were free to use in SMSes as long as we gave them free to their customers, and their branding was retained. Airtel flat out refused to allow it, and instead asked for crores of rupees from Coke.

In today’s app stores, if any free app earns money through advertising, there is no need to share revenue with Amazon, Google or Apple.

I think Airtel was unable to understand the simple point of who the customer was. If a mobile subscriber is not paying for an app, he is not the customer. It was the equivalent of Airtel asking for a share of revenue every time one of its subscribers bought an ice cream!

From the operator’s point of view, they think “I paid a huge licence fee for mobile spectrum, so I will charge a toll tax on all content”. That is perverted and short-term logic. It is also the reason why nobody understands the importance of ecosystems in India.

The culmination of my story is when our game app Parking Frenzy became Number One on the Apple App Store. In one stroke, we achieved three of the things we had set out to do—win using our own IP; build without begging for favours; and crack the world’s largest market and not the most myopic one.

 (As told to Rohin Dharmakumar)

This article appeared in Forbes India Magazine of 14 June, 2013

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First Published on: Jun 4, 2013